Safety stock management

The term safety stock management (SBM) refers to the safety stock-oriented improvement of the process stability of a value chain.

SBM is based on the insight that in the field of materials management, a disruption or weak point in the system must either be resolved or compensated for by safety stock in order to achieve a stable process. This is not just about demand uncertainty, which is absorbed with the help of the classic safety stock in an ERP system. It is about safeguarding against all disruptions in a process chain, starting with unreliable replenishment times, quality problems in production and with procured parts, unplanned machine breakdowns, fluctuating transportation times, etc.

If the required safety stocks are calculated for all these process uncertainties, a good measure of the costs of the respective process instabilities is obtained. No management would accept the calculated safety stock pile and it should not be built up at all. The calculation of the theoretically required (imputed) safety stocks should rather help to evaluate the costs of process instabilities and derive the priorities for improving process stability.

The SBM is also exciting because it continuously demonstrates the cost of process uncertainties. Even if no corresponding safety stocks are built up, these costs are incurred in the form of “friction losses”, delivery problems, additional work, special trips, etc.. However, they seep into numerous cost centers and are therefore not clearly visible.

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Since SBM is not about determining the “scientifically” precise safety stocks, the respective safety stocks can be calculated using simple statistical means for a required delivery readiness level. If you set 98% availability as the target value, the imputed safety stock is 2.054*standard deviation of the fluctuation caused by the fault. Your aim should be to continuously reduce the required imputed total collateral stock.